Twitter Opens the Books, But Facebook’s IPO Looked So Much Better

Photo: Ariel Zambelich/WIRED

Twitter finally opened the kimono on Thursday, showing the world its bottom line for the first time as it filed for an initial public offering. And, truth be told, the show wasn’t that impressive — especially if you watched Facebook perform the same fiscal kabuki before it went public last year.

It makes a lot of sense to compare Facebook and Twitter. Each company went through about eight years of life before going public — give or take six months — and each runs a fast-growing, Silicon Valley-based social network with a global footprint and a heavy dependence on advertising. But financially speaking, there’s a massive gulf between them: One is a reliable profit gusher while the other is an anemic mess.

First, credit where credit is due: Twitter is a growth machine. It tripled sales in 2012 and it more than tripled in 2011, and in most of the last six quarters, it grew its active user base by more than 10 percent. More than 65 percent of its advertising appears on mobile devices, a particularly important, fast-growing market. Revenue went from $28 million in 2010 to $317 million last year, giving Twitter significantly better revenue growth in the years leading up to its IPO than Facebook.

The trouble is, losses are growing too. They grew to $69 million for the half-year ended June 30 versus $49 million in the same period last year, extending a streak that has seen Twitter lose money in every year of operation it has disclosed. Facebook, in contrast, posted steadily rocketing profits for the three years leading up its S-1.

Then there are the absolute numbers, which make Twitter’s little-bird mascot seem apt. By the time Facebook went public, it was posting $1 billion in annual profit on $3.7 billion in revenue from 845 million monthly users. So Twitter is less than one-tenth the company Facebook was when it went public, in terms of sales. It’s less than one-third the company Facebook was in terms of users, claiming 218 million monthlies. And it’s infinitely worse from a bottom-line perspective, since it’s still losing money, $79 million last year. The silver lining there is that losses narrowed between 2011 and 2012. But sadly, they widened this year, by 41 percent in the first six months.

It’s also worth noting that Twitter’s user growth is slowing, to 7 percent in the most recent quarter from roughly 10 to 11 percent in prior quarters. But in fairness to the Twitter: Facebook also saw monthly user growth decline in the last quarter contained in its own S-1 — though this was across a much larger user base.

The trouble with Twitter, then, is that its growth seems to have been stunted. Seven and a half years after launch, it’s not only still losing lots of money, but it’s also a small fraction of the company Facebook was eight years after launch. This despite some big advantages, like free content from global mega-celebrities ranging from the presidents of the United States and Russia to stars like Steve Martin and Oprah Winfrey (to say nothing of Justin Bieber and Lady Gaga). Then there’s the $1.1 billion in venture funding that has been lavished on the company at generous valuations.

Twitter’s arrested development makes sense when you consider it ran through three different CEOs while Facebook was run by just one. The optimistic interpretation of Twitter’s much weaker growth story is that over the past three years, under CEO Dick Costolo, the company finally stopped screwing up and put itself on an excellent trajectory that is bound to continue given Twitter’s strong position in mobile and trove of frequently-updated celebrity content. But we’ll find out in the next couple of months whether investors buy that story. Facebook was in a much stronger position — and its IPO didn’t exactly go well.